Welcome to banking's ex-growth era
The banks have too much capital and not enough to do with it. The sector is clearly ex-growth and went downhill into the second half. So where now?
Not long after he took the reins at ANZ in 2016, Shayne Elliott was the first to call an end to the “golden era” of banking . Setting low expectations maybe, but he was right. Even before Covid and the debacle of the Financial Services Royal Commission, the dream run for banks as they ran ahead of a growing economy was over.
After the bank’s full-year result yesterday, and despite what on paper looks like a very strong year for the sector, he has conceded to Capital Brief that the banking industry is not only post-golden age but also now ex-growth. If investors are looking for high returns in a higher interest environment, banks are not where they’ll get them.
Maybe then it’s not a propitious time to launch this newsletter, Capital Gains, which will focus on the financial services sector — TradFi, DeFi, fintech, capital markets and everything in between. Then again, the most exciting time to look at finance is when a downturn looms.
Elliott is talking his book a bit here: the sector most ex-growth is Australian retail banking, where he has the smallest share of the Big Four; meanwhile, his is the most diversified bank in both business mix and geography. And he’s the one arguably doing the most damage to margins in retail banking with ANZ’s mortgage pricing.
